Rite Aid Corporation, WCI Communities & Other Stocks in Spotlight Following Earnings, M&A News and More

Wall Street is quiet today after the Federal Reserve’s Wednesday decision of keeping interest rates the same. All three major index futures are moderately higher while crude is up around 1%.

In this article, we take a look at why five stocks: Rite Aid Corporation (NYSE:RAD), AutoZone, Inc. (NYSE:AZO), Lennar Corporation (NYSE:LEN), WCI Communities Inc (NYSE:WCIC), and Sarepta Therapeutics Inc (NASDAQ:SRPT) are in the spotlight today. In addition, we will assess the hedge fund sentiment towards each stock, based on data from the last round of 13F filings.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 740 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

Rite Aid Corporation (NYSE:RAD) earned $0.03 per share on revenues of $8.03 billion in its fiscal second quarter, versus estimates of $0.03 in EPS and revenue of $8.09 billion. Revenues rose by 4.8% year-over-year while adjusted EBITDA amounted to $312.7 million, down from $346.8 million reported for the same period last year. Although Rite Aid’s revenues missed the consensus, shares of the company don’t show significant action in pre-market due to the chain’s pending merger with Walgreens Boots Alliance Inc (NASDAQ:WBA), which if approved will net Rite Aid shareholders $9 in cash for each share they own. David Einhorn‘s Greenlight Capital established a new position containing 10.33 million shares in Rite Aid Corporation (NYSE:RAD) in the second quarter.

AutoZone, Inc. (NYSE:AZO) is in the spotlight after reporting mixed results for its fiscal fourth quarter. During the quarter, AutoZone earned $14.30 per share on revenue of $3.4 billion, beating the bottom-line consensus estimate by $0.04 per share, but missing top-line expectations by $30 million. Total revenue appreciated by 3.3% year-over-year as domestic same-store sales inched up 1%. For the full fiscal year, AutoZone, Inc. (NYSE:AZO) posted earnings of $40.70 per share on sales of $10.6 billion, up 13% and 4.4% year-over-year, respectively. Of the around 749 funds that we track, 41 funds owned shares of AutoZone, Inc. (NYSE:AZO) at the end of June, down by five funds from the previous quarter.

On the next page, we take a closer look at Lennar Corporation, WCI Communities, and Sarepta Therapeutics.

WCI Communities Inc (NYSE:WCIC) shareholders are pretty happy today after Lennar Corporation (NYSE:LEN) agreed to buy the company for $23.50 per share in cash and stock, representing a 37% premium to WCI’s closing price on September 21. According to the terms, WCI shareholders (on a per share basis) are entitled to receive $11.75 in cash and a fraction of a share of Lennar Class A stock with a value of $11.75 based on the volume weighted average price of Lennar’s Class A stock over the ten trading days preceding the WCI stockholder vote on the merger. Lennar also retains the option of varying the cash and stock percentage, including paying the entire merger amount in cash. Lennar is buying WCI because the company feels that WCI’s “land portfolio dovetails perfectly with [their] own Florida footprint and expands [their] product offering to capture more of the move-up market. [Their] combined presence in the premier coastal Florida markets will drive growth and allow significant cross and dual brand marketing opportunities.”

According to our data, 12 funds had a bullish position in WCI Communities Inc (NYSE:WCIC) at the end of the second quarter. By comparison, 40 investors were long Lennar Corporation (NYSE:LEN) at the end of June.

Sarepta Therapeutics Inc (NASDAQ:SRPT) is making headlines after the biotech, which recently received accelerated FDA approval for Exondys 51 (eteplirsen), a treatment for DMD, announced a proposed public offering of up to $225 million worth of common stock. In addition, Sarepta intends to grant underwriters a 30-day option to purchase an additional 15% of common stock offered in the public offering. The pricing and terms of the offering were not disclosed in the initial press release. The number of funds from our database long Sarepta Therapeutics Inc (NASDAQ:SRPT) went up by one to 20 during the second quarter.

Disclosure: none